Wage-Hour Enforcement and Litigation

The Fair Labor Standards Act of 1938 (FLSA) and the regulations implementing it pose one of the most difficult compliance challenges for today’s employers. Written at a time when the Ford Motor Company was making Model A’s on its production line with considerable manual labor and relatively little automation, employers face extreme difficulties in determining when employees are “on the clock” (and thus potentially eligible for overtime) in a virtual workplace where work is performed in a variety of settings with often indeterminate schedules. Because of the vague rules which often do not contemplate contemporary occupations, employers also face difficulties in deciphering which employees are covered by the law and which are not—even when employees express a clear preference for not being covered by the law’s inflexibilities.

The challenges employers face are exacerbated by the fact that that the statute provides not only for enforcement by the Department of Labor (often very aggressive in its enforcement tactics) but also by private rights of action. As a result, the private bar has taken advantage of the law’s lack of clarity by pursuing highly lucrative class actions against employers who struggle to ascertain what is required. Thus, the number of FLSA lawsuits has quadrupled from about 1,500 per year in the early 1990s to over 6,000 in 2009, and this does not count the number of cases brought under state laws which often vary from the federal law. Faced with the uncertainties of the law, companies often settle these cases, with a median settlement cost of $7.4 million for federal cases and $10 million for state cases.

In addition to reforming the FLSA’s outdated requirements to comport with today’s workplace, HR Policy supports reforms in its enforcement that would protect employers making a good faith effort to comply with the law against rigorous enforcement actions by the Department of Labor and class actions that reward plaintiffs’ lawyers for exploiting the law’s vagueries.